FDI in beverages in 2021: The state of play

By Andy Morton

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The number of FDI projects in the beverage sector grew in 2021, with regions such as western Europe showing signs of recovery from pre-pandemic levels. Marina Leiva reports.

Much like the trend for overall foreign direct investment (FDI), the number of projects that took place in the beverage sector rebounded in 2021 against the Covid-hit prior year. However, the recovery was patchy and the economic and geopolitical backdrop that faces all consumer industries could weigh on investment in the months ahead. 

Overall, across industries, the pandemic caused greenfield FDI project numbers to decline by 17.5% in 2020. However, as the world reopened in 2021, investors reacted quickly and FDI levels rose by 18.1%, according to the Global FDI Annual Report 2022, produced by GlobalData and Just Drinks sister site Investment Monitor. 

Most sectors witnessed an increase in the number of projects, with companies keen to make up for lost time, yet that growth is not expected to be sustained. Investment levels will likely fall again in 2022. Russia’s invasion of Ukraine has led to heightened geopolitical tensions, a global cost of living crisis, slow economic growth and continued supply chain disruptions. All of which will claw back the resurgence FDI seen in 2021. 

Beverages FDI rebounds in 2021

There were 112 greenfield FDI projects in the beverages sector in 2021, up from 98 the year before, according to GlobalData’s FDI Projects Database. Yet this total remained below the 131 recorded in 2019, signalling the industry’s prolonged Covid-19 hangover. 

Out of all the projects in beverages FDI in 2021, 64% of them were new, while the remaining 36% were expansion projects. 

Where were the leading destinations for beverages FDI?

Western Europe was the leading region when it came to attracting FDI in beverages in 2021, with 31.3% of all projects announced or opened globally. The region recorded the same number of projects in 2021 as it did in 2019.  

However, North America was the only region that saw an increase in projects in 2021 from 2019, with 70.6% more projects.  

Beverages FDI increased 162.5% in Asia-Pacific from its 2020 level, seeing almost the same amount of projects as before the Covid-19 pandemic in 2019.  

Canada was the leading destination country for beverages FDI in 2021, seeing growth of 275% from pre-pandemic levels. It received a total of 15 projects, up from four in 2019 and five in 2020. The US ranked second with 14 projects, one more than the country recorded in 2019 though down on the 18 projects seen in 2020. 

Labatt Breweries, a subsidiary of Anheuser-Busch InBev, was one of the more active investors in North America, accounting for 13 out of the 15 recorded projects in Canada in 2021. At a site in Ontario, it set out plans to invest CAD52.6m (US$38.5m) at its brewery in London. The money was spent on initiatives such as KeelClip, a minimal material fastener made of recyclable fibre paperboard to replace the use of plastic rings, tops and shrink film, as well as a new can line the company said “increases packaging flexibility and supports product innovation”. 

Several countries, including Germany, France and Spain, began to recapture inward investment in 2021, having seen levels plummet in 2020.  

Where in their operations did drinks groups focus their FDI? 

Manufacturing continued to be the leading business operation for foreign investors in beverages in 2021. A total of 60 projects were created with a sales-related function, up 1.7% from 2020 but down 29.4% on 2019 levels. 

Sales, administration and marketing, and logistics and warehousing ranked second and third in 2021, with 33 and nine projects, respectively. 

Canada was the leading destination for manufacturing projects in beverages FDI in 2021, with a total of 13 projects, while the US was second with eight and the UK and France were joint third with a total of four projects each.

What were the top categories for FDI?

Beer was the top sub-sector when it came to FDI projects in beverages in 2021. The number of beer projects increased by 12.9% in comparison to 2019, placing it ahead of soft drinks, mineral waters and other beverages, which had topped the sub-sector ranking in 2019. 

A notable investment in the beer category was announced by Corporacion Hijos de Rivera, a Spain-based brewery, to build an Estrella Galicia brand factory in Araraquara in Brazil. The company announced an investment of around US$335m in two phases of construction, with the aim of installing a medium-term production capacity of 300 million litres of beer per year, to be executed in two parts of 150 million litres each. Estrella Galicia is scheduled to open the factory on a 250,000 square metre plot in 2023, creating 400 new jobs.

Where are the leading beverage investors located?

The analysis shows the US remained the leading source market for outbound beverages FDI in 2021. In fact, the investment level in 2021 was almost as high as in 2019. There were 27 outbound projects in 2021, close to the 30 recorded in 2019. 

PepsiCo was the leading beverages investor from the US in 2021, with a total of six projects, followed by The Coca-Cola Co. with four projects.  

Three out of the six PepsiCo projects were in manufacturing operations, as were two out of the four projects by The Coca-Cola Co. 

The six PepsiCo projects were spread around the world, including plans to open a new regional headquarters in Saudi Arabia and a $84.2m investment to open a new logistics centre in Huejotzingo in Mexico. 

Meanwhile, The Coca-Cola Co. announced R&D and manufacturing projects in 2021, including a new digital hub in Ireland and an expansion to its plant in Laguna in the Philippines. The company announced an investment of $63m for the expansion of the Philippines site. 

What does the future hold for FDI in beverages? 

The recovery in the beverages sector has been strong in regions such as western Europe, North America and Asia-Pacific. However, all other regions are still feeling the effects of the pandemic. 

Although Covid-19 brought about some changes to beverage consumption around the world, such as the emergence of alternative alcoholic drinks like hard seltzers, the beer market segment has shown continued strength between 2019 and 2021. 

The industry faces new economic and geopolitical challenges, not least the impacts of the Ukraine-Russia conflict, which might potentially impact consumption. Being a broad sector covering all beverages from mineral water to beers and soft drinks, it does have a degree of flexibility to adapt to changes in consumer trends and limit the impact of these market headwinds. 

Cover Image: A close-up of a Labatt sign on a building in the Canadian province of Ontario.
Image credit: JHVEPhoto / Shutterstock.com